MFIs under stress, banks finding it difficult to lend: RBI
NEW DELHI: Microfinance institutions are under some stress and banks are finding it difficult to justify lending to them, said Reserve Bank of India's (RBI) deputy governor Subir Gokarn on Tuesday.
Gokarn, who termed MFIs as a very important component of India's inclusive strategy, said the community will have to operate in ways consistent with the overall inclusion agenda of the central bank.
"Microfinance institutions constitute a very important component of our inclusive strategy. The last mile that the MFIs have been able to achieve is not achieved by the formal sector," Gokarn said. His statement came barely a fortnight after RBI's former governor Yaga Venugopal Reddy termed microfinance institutions as India's subprime. "The last mile that the MFIs have been able to achieve is not achieved by the formal sector," Gokarn said while commenting on the role of MFIs in the country. Earlier, the finance ministry had told public sector banks to ask MFIs to cap their lending rates in the range of 20-24% as a precondition to advances.
Following that SKS Microfinance said that it will bring down rates to 24% across states. "At the same time they have to operate in a way that is consistent with the overall inclusion agenda. The community will have to achieve the balance. They have to find ways of keeping them viable and active within certain boundaries of business process," Gokarn said. -PB News